Manchester United FC's struggles put strain on business model, sales of merchandise dip

Mar 21 2014, 15:05 IST
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Manchester United's Robin van Persie celebrates with Wayne Rooney during their Champions League match against Olympiakos at Old Trafford. (Reuters) Manchester United's Robin van Persie celebrates with Wayne Rooney during their Champions League match against Olympiakos at Old Trafford. (Reuters)
SummaryA series of losses has put pressure on business model of Manchester United, one of the richest clubs in Europe.

a mood of defiance among fans.

Executive vice-chairman Ed Woodward is confident that United's fan base will prove resilient and believes that the club has the business model in place to bounce back strongly.

"Some of our competitors haven't won the Premier League for a long time but are still selling a huge number of shirts out there globally," he told analysts last month in a dig at rivals like Liverpool and Arsenal.

A new kit supply deal United is currently negotiating will be a barometer of the commercial appeal of the club.

The club is talking to Nike and rival sportswear companies about a new kit supply deal to replace a long-standing agreement with the U.S. company that expires next year.

United generated revenue of 38 million pounds from the Nike agreement in 2012-13, their last season under Alex Ferguson, who retired last May as Britain's most successful soccer manager and has proved such a hard act to follow.

REBUILDING WORK

The club's forecasts for 2013-14 were based in part on reaching the last eight of the Champions League so the comeback win over Olympiakos Piraeus on Wednesday had extra importance.

However, the real impact of this season's poor form will be felt next year when United risk missing out on a place in the Champions League, worth at least 35 million euros.

United will also have to spend upwards of 100 million pounds this summer to strengthen an ageing squad that has failed to match domestic rivals Manchester City, Chelsea, Arsenal and Liverpool this year.

It is timely that a new shirt sponsorship deal with GM's Chevrolet will begin in full from next season, generating a world record $559 million over seven years.

United also have the option of raising additional cash through share sales after floating around 10 percent of the club in New York two years ago.

The club still easily outscores English rivals in generating revenue and believes it can fund rebuilding out of cash flow.

United got a vote of confidence from a surprise source when it was revealed last week that U.S. investment group Baron Capital had built up a stake of around 5.8 percent by buying up shares on the market.

Baron describes itself as a long-term investor in growth businesses and its investment has helped support shares which traded at $15.84 on Thursday, valuing the club at around $2.6 billion.

The mood around the club was perhaps best summed up by United fan Cesar Granda who

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